Study: E-mail Use By Top Firms Highly Inefficient

A study by the IMT Strategies, the Direct Marketing Association and the Association for Interactive Media blasts some long-held assumptions about online direct marketing.

Despite their growing use of e-mail marketing, large businesses are facing serious problems that stand to drastically undermine the industry's long-term effectiveness, according to a new study conducted by IMT Strategies and sponsored by the Direct Marketing Association and the DMA's subsidiary, the Association for Interactive Media.

As a result, even though permission e-mail seems well-suited to marketing applications -- with average CRM conversion costs often one-tenth those of direct mail -- the research suggests that big companies are largely bungling it.

Chiefly, the findings suggest that as e-mail expands in popularity among top marketers, the channel is falling increasingly out-of-step with consumers' maturing demands, and marketers' own ability to manage their data.

For one thing, customers have higher expectations for permission marketers than they did two years ago. For instance, 50 percent more consumers say they get "more e-mail than they can handle" than last year, while 77 percent of online customers delete unwanted commercial e-mails without reading them.

They also tend to look unfavorably on marketers who send them unsolicited or irrelevant e-mailed offers -- which could impact their willingness to give personal information. Indeed, 19 percent of the 300 consumers polled by the study's authors said they refused to give away any personal information at all.

Meanwhile, the study suggests that even though they are spending record amounts on e-mail marketing annually -- about $1.4 billion in 2000, according to the New York-based DMA -- permission marketers are being hit with ballooning campaign management costs while seeing eroding response rates.

Indeed, 22 percent of the 300 Global 2000 firms that IMT Strategies surveyed described their permission e-mail management as "out of control" -- with the average large organization using four independent e-mail databases, and 41 percent using five. Only 12 percent of organizations used enterprise-wide customer databases -- that integrated data across parts of the organization -- to run their e-mail programs.

It's not just marketers' data management that's running awry -- companies are often completely failing to target messages to the appropriate audiences, according to the study. Less than half of the marketers surveyed said they lacked ways to manage the relevance of the e-mails they send to their customers.

And all those inefficiencies add up. Stamford, Conn.-based IMT Strategies said that for every dollar that corporations spend with outside vendors, another two are spent on hidden costs -- such as in-house campaign management, content development, channel and permission policy governance, and database management.

Not surprisingly, then, as the complexity of the enterprise increases, campaigns' effectiveness appears to decrease. Large companies -- those with more than $500 million in revenues -- typically saw e-mail campaign response rates about half of those of smaller, more closely managed firms, according to the study's authors.

The findings stand in marked contrast to some long-held assumptions about the industry: that it's automatically cheaper and more efficient than direct marketing, provides for better targeting, and can produce better conversion rates. Evidently, that's far from the truth, at least in practice.

"As 2001 progresses, e-mail will serve as the 'poster child' for much of what is wrong with the multi-channel sales and marketing processes currently in place at large organizations," said IMT Strategies president Stephen Diorio. "Without better process and policy management many marketers risk destroying the e-mail channel before it has time to mature."

In addition to the DMA and AIM, other sponsors of the study included e-mail marketers DoubleClick, (NASDAQ:DCLK) Netcentives, (NASDAQ:NCNT) NetCreations, Quiris, Responsys and CMGI's (NASDAQ:CMGI) yesmail.com.